Ryan Aylward

Friday🔥02: NFL as a Business, Subscription Flying?

Ryan Aylward -

Welcome to the Friday Fire, a NEW weekly newsletter of ideas, learnings and inspirations from the past week.

Start your weekend off right with a little FRIDAY 🔥

NFL as a Business

  • Ever find yourself watching a sporting event and wondering how the underlying business operated? (ok, maybe that's just me)

  • Regardless, in honor of the epic Super Bowl showdown this week, I wanted to pull the curtain back on how the business of the NFL operates.

  • Here is a link to the article: https://www.ryanaylward.com/nfl-the-business-behind-the-pigskin/

  • For those in the TLDR camp - here are a few article highlights:

    • The NFL generates ~$10bn of league-level revenue. ~$8.5bn of this ad-driven earnings stream is distributed equally among all 32 teams! ($270mm per team!)
    • Each team is required by the collective bargaining agreement to earmark ~60% of the the $270mm payment from the league for player salaries... the highest revenue sharing rate across any sport!
    • Ticket sales are more or less a break-even financial proposition for team owners
    • Local sponsorship revenue is the core revenue driver for NFL franchises. New stadiums provide increased suite and local sponsorship opportunities which is driving recent stadium newbuilds (Los Angeles, Las Vegas)
    • Team ownership is not a particularly attractive financial asset (from a rate of return perspective). Some franchises are outright money losers on a cash flow basis. Profitable teams have an implied valuation of 25-30x earnings, which is hardly an exciting rate of return.

  • Market Trading Update: S&P / NASDAQ were both down 3% week, uncertainty around inflation and Russia/Ukraine political tensions dominated headlines

Subscription Flying?

  • This week Alaska Airlines announced its annual 'Flight Pass', a subscription plan that allows subscribers to travel on eligible Alaska Airlines flights by paying a fixed monthly fee.
  • There are a few different program tiers, but to give you a sense of flight costs: the basic plan (which requires 2-week advance bookings) costs $100/mo for 1 round trip flight and $190/mo for 2 round trip flights. Not bad.
  • Right now, route covereage for the Flight Pass is limited to intra-California travel and from Cali to Arizona/Nevada.
  • My Take: Certainly an interesting experiment by Alaska. This is most likely a brand-building/consumer awareness play for the Company than it is a true business model pivot. Other airlines have tried similar experiments in the past (Spirit's $9/fare club)... the reality is that there is still a lot of friction to the travel experience (leaving home, dropping dog at the kennel, hotel reservations, airport parking, etc) and thus the travel addressable market at-large can't just pick up and fly on a regular basis without significant incremental cost.
  • Subscription products work best for highly regular, low friction consumption - and even if Alaska makes this a seamless experience for flyers, subscribers still have to absorb all the associated costs which accompany flying... every month.
  • It feels a bit gimmicky to me, but as a California native, I also find it intriguing. I wouldn't be mad about flying to Tahoe, San Luis Obispo or Sonoma on a monthly basis!

Gratitude

Each week I try to consciously acknowledge a source of gratitude in my life. While its fun to focus on the future, gratitude helps cultivate a sense of joy and appreciation along the way. Gratitude need not be reserved for the big or elaborate happenings in life.

  • This week I'm grateful for the ability to swim in an outdoor pool during the month of February (without freezing to death)... its the little things :)

What are you grateful for this week?

Update on Stock Picks:

Weekly performance update below for active stock picks:

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Have a Great Weekend, Ryan ✌️

P.S. - As a bold request of anyone reading... my vision this year is to reach an audience of 5,000 people. If you know anyone who may like this article or if you have advice on strategies to reaching this goal, I'd love your input!